IR wants redress from Andersen Consulting

2 Mar 00
The Inland Revenue is likely to pursue a compensation claim against Andersen Consulting after a catalogue of delays with the new National Insurance Recording System has left it four years behind schedule and at least £53m over budget.

03 March 2000

According to a report from the National Audit Office this week, delays in the NIRS2 scheme have already resulted in a £35m compensation payout for pension schemes plus an estimated £2m in benefits and £1.37m in extra staffing costs. The cost of clearing the backlog in benefits alone is expected to be £14.1m.

The NIRS2 scheme, designed to replace the main national insurance computer, has been plagued by errors since the ten-year PFI deal was signed in 1995. Andersen Consulting has been heavily criticised for its 'lack of management control'. The NAO indicates that NIRS2 could not now 'reach an acceptable level of quality' until next year.

'I am concerned that the system may not be fully operational, in the worst case, until June 2001,' said Sir John Bourn, the auditor general. 'These problems will continue to have a significant impact on the Inland Revenue's ability to manage national insurance contribution debt,' he warned.

Ministers are taking legal advice on the possibility of a compensation claim. They are likely to be under pressure from the government to recover a sizeable portion of the extra £53m.

The NAO report also uncovered fraud, errors and overpayments in social security benefits that have cost the National Insurance Fund more than £147m, including up to £46.9m in fraudulent claims for the Jobseekers Allowance and up to £56.6m in false giro cheques and order books.

For the thirteenth year running, Sir John refused to approve the fund's accounts.

The Benefits Agency and the Employment Service were also criticised for miscalculating £44.9m in benefits payments, £35.6m of which were overpayments.

'These figures tell the same depressing tale as is found in recent NAO reports covering other benefits, particularly housing benefit and income support,' said David Davis, chair of the Public Accounts Committee. 'Taken together, they suggest a social security system plagued by fraud and riddled with error.'

The PAC is beginning an investigation into the National Insurance Fund and NIRS2 on March 15.


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